India throws poor to the wolves

In India medicines constitute almost 80% of the total health expenditure in the country and the expense on drugs is the second most common cause of indebtednessin the country. Yet, the pharmaceutical sector wants free market in India without any sort of price control, with the market regulating prices. Already, from 370 bulk drugs under price control in the 1970s, the government has whittled down the list to just 76. Yet, around the world, even market economy countries, barring a few like the US, have always exercised and continue to exercise considerable control over drug pricing to ensure availability of affordable quality drugs.

Some time back, the UK brought in a new system to restrain drug prices sufficiently by bringing down the price of all branded drugs with the incentive that if a drug manufacturer submitted new evidence of greater efficacy of their drug compared to others in the same therapeutic category they could increase the price. Under the new scheme, the government-run National Health System (NHS) which reimburses drug purchases will also routinely substitute all off-patent drugs with cheaper unbranded generics. The new coalition government also has proposed new measures to bring down prices.

In France, where the government reimburses 76% of drug expenditure in the country, the price setting of reimbursable drugs is based on its medical benefits, the price of other similar drugs, actual or forecast drug sales, the price proposed by the manufacturer and the price in the neighbouring countries of Germany, Italy, Spain and the UK. Drugs with no improved therapeutic value or saving in cost of treatment are not reimbursed. Non-reimbursable drugs are not price-controlled.

Even in Sweden the government is combining price cuts on off-patent medicines along with generic competition. They also have a system of substituting the prescribed drug with a cheaper generic drug to ensure substantial saving from drug expenditure. Drug prices have been facing cuts across Europe as governments tackle ballooning budget deficits.

In Brazil, the price of prescription drugs is based on the price in foreign markets with low prices. It also put in place a reference price regime for new patented products in 2003. Under this regime, the final price of a new drug in Brazil cannot exceed the lowest price among nine reference countries. After a price freeze effective since 2003, the regulatory authority in Brazil allowed over 3% increase in 2007 and in March 2009, a price increase of 6% was authorized, affecting 17,950 products. Yet, the country remains an attractive market for multinational pharma companies due to its dynamic growth, overall market size and increasingly urbanized population, features present in India too.

In April this year, the Chinese government, in response to rising public resentment over drugs prices, announced that it would compile a list of essential medicines from the WHO list of 300-400 essential drugs and produce and distribute them under government control and supervision.

In 2007, the Chinese government adjusted the retail price of 354 drugs, the 20th such price cut in China since 1996. In 2006 it even capped mark-up and profit margin on many drugs.

In comparison to these developing countries, in India, price control is being steadily eroded. This is despite study after study showing that market forces do not bring prices down. Often the highest-priced drugs are the best selling ones in their category as the decision on what drugs to purchase is made by doctors who are often induced to prescribe drugs with high profit margins for companies. Patients, forced to make the buying decision in a state of distress, have little or no choice.

Across Europe, most countries have some form of price control especially because it is the government which bears the bulk of expenses on drugs through various reimbursement schemes unlike India where almost the entire expenditure on drugs comes from consumers’ pockets. "Of India’s total health expenditure, 80% is spent on medicines, with the poorest 20% of the population being the hardest hit by high medicine prices as medicines account for almost 86% of their entire health expenditure," explains Dr Amit Sengupta of Jan Swasthya Abhiyan.

In most market economy countries, like the European countries, the government, being the largest buyer of medicines, negotiates prices with pharma companies and the patients never have to pay at the point of treatment as they are covered by public funded health insurance and hence they never suffer catastrophic expenses when they fall ill.

Even in the US, notorious for very high drug prices, the government negotiates the price of drugs for a large number of the elderly, disabled and destitute through Department of Veterans’ Affairs and health insurance companies like Medicaid and Medicare. India alone seems to throw it sick and poor to the mercy of the drug companies with the government spending just 10% on drugs from its total health budget which itself accounts for less than a quarter of the total health expenditure in the country.

DISCLAIMER : Views expressed above are the author's own.

Author

Rema Nagarajan is with the Times Insight Group, which has a mandate to look at stories beyond and behind the headlines. She writes mostly on development issues like health and factors that affect people's quality of life. This includes life-affirming stories of extraordinary individuals and organisations who have made a difference.

Rema Nagarajan is with the Times Insight Group, which has a mandate to look at stories beyond and behind the headlines. She writes mostly on development iss. . .

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Author

Rema Nagarajan is with the Times Insight Group, which has a mandate to look at stories beyond and behind the headlines. She writes mostly on development issues like health and factors that affect people's quality of life. This includes life-affirming stories of extraordinary individuals and organisations who have made a difference.

Rema Nagarajan is with the Times Insight Group, which has a mandate to look at stories beyond and behind the headlines. She writes mostly on development iss. . .